Nearly 50% of the employee layoffs at Microsoft’s Washington office affected staff in software engineering roles, as the company has started to rely more on AI tools for coding tasks.
There has been a recent trend of major tech firms switching to AI reliance. Salesforce, for example, announced earlier this year that it would be terminating over a thousand roles and hiring more staff in AI-focused sales positions.
Workday also said it would continue hiring in the AI sector after announcing its own layoffs in February, and now Microsoft is laying off its employees to make room for AI agents.
Microsoft’s latest layoffs
Nearly half of Microsoft Corp.’s most recently laid-off staff are software developers. According to state documents reviewed by Bloomberg, more than 40% of the roughly 2,000 employees who were laid off in Microsoft’s home state of Washington were from software engineering roles.
The Washington layoffs represent around a third of the 6,000 individuals employed at Microsoft. The company cited the need to prioritize AI technologies as the reason for the layoffs it announced on Tuesday.
Software engineering has long been seen as one of the most stable and in-demand roles in tech. However, due to the increasing reliance on AI to write and analyze code, the role is beginning to lose relevance as the work can simply be automated.
Microsoft’s CEO, Satya Nadella, highlighted this transition to AI coding in April, stating that AI now writes as much as 30% of the code in certain company projects. With tools like GitHub Copilot, which was developed and is owned by Microsoft, being capable of assisting or even replacing portions of manual coding, the value of human developers is being reassessed.
With 817 software engineer roles terminated in Washington, developers took the largest hit from the layoffs. However, they weren’t the only employees affected. Product managers, technical program managers, and others in roles responsible for overseeing and executing software projects also saw significant reductions.
The terminated roles of product managers and technical program managers accounted for nearly 600 layoffs in the state, or about 30% of the local cuts. There was a smaller number of layoffs for workers in business program management, customer experience roles, and product design.
Some employees working directly on AI-related projects were also let go, according to a person familiar with the situation.
AI innovation claims victims
Microsoft justified the layoffs as a way to “remove layers of management.” Around 17% of employees laid off in Washington were classified as managers, which roughly matches the proportion of managers in Microsoft’s entire workforce at the end of 2023, according to a report filed with the US Equal Employment Opportunity Commission.
Microsoft is pouring billions into building data centers to support its AI ambitions. The CEO, Nadella, and other executives have repeatedly stressed the need for fiscal discipline in the company, despite the promise that AI will drive a new era of growth and productivity.
Customer-related roles in sales and marketing saw relatively few layoffs, but the impact of the layoffs will affect them as well as the remaining employees in non-customer-related roles.
The layoffs have given the sense that even top technical roles can be automated or eliminated, which could alter employee morale and future hiring rounds.
Microsoft has not publicly commented on the details of the layoffs, and it is still unclear at this time how the company intends to distribute the remaining work among its teams or whether additional layoffs are to be expected.
